Fred Has a Utility Function U = 10P ⁰

question 42

Multiple Choice

Fred has a utility function U = 10P ^0.5 and also has an investment opportunity that will pay 25 with probability 0.4 and 100 with probability 0.6.What is the certainty equivalent of this opportunity?

• A) 64.
• B) 70.
• C) 80.
• D) 83.7.
• E) None of the above.

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Definitions:

Alertness

The state of being watchful, fully awake, and ready to respond to stimuli or challenges that arise.

Brain Wave Patterns

The electrical activity in the brain, as detected by electroencephalography (EEG), which is associated with different states of consciousness.

Alpha Waves

Brainwave patterns associated with a state of wakeful relaxation and calm alertness.

Theta Waves

A type of brainwave pattern associated with sleep, deep relaxation, and certain stages of memory processing, typically in the frequency range of 4–8 Hz.